Question
In: Finance
H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset...
H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.15 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2.23 million in annual sales, with costs of $1.25 million. If the tax rate is 23 percent, what is the OCF for this project? (Do not round intermediate calculations and round your answer to the nearest whole dollar amount, e.g., 32.)
Solutions
Expert Solution
| Annual sales | 2230000 |
| (-) Annual costs | 1250000 |
| (-) Annual depreciation [ ( 2150000 - 0 ) / 3 ] | 716667 |
| Profit before tax | 263333 |
| (-) Tax @ 23% | 60567 |
| Net income | 202767 |
| (+) Annual depreciation | 716667 |
| Operating cash flow (OCF) | 919433 |
jeff jeffy answered 3 years agoRelated Solutions
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